CASE STUDY: CONTRASTING CHINA’S

YUNAN MODEL WITH BANGLADESH’S

YUNUS MODEL FOR MICROFINANCE

Nimrah Farooq
Salwa Aftab
Sana Farooq
Sehrish Riaz
BBA – B
 QUESTION NO: 01

Compare the Grameen Bank Model with the

Yunan Model. Why is the Yunan Model right for
China’s impoverished areas?
 COMPARISON
Grameen Bank Model • Yunan Model
• Small loan credit bank
• Seek loans without
collateral or mortgages 1) Credit information
center
• Goal: “promoting economic
and social development to 2) Credit village
the lower class of society”
3) Rural financial system
• Criticism on Yunus Model
 i) embezzled funds
ii) Interest 20% to 50%
Grameen Bank Model
iii) Beneficiaries were NGOs,
loan sharks and banks
Anyone can get a loan from
bank, but not everyone can
make the repayments.
Yunan Model
• Whether this model could
work in larger cities
• Why couldn't the Yunan
model spread to other far
away places
• Public credit IS lead to
negative results
 YUNAN MODEL
• Credit information center
In order to avoid incomplete and overlapping data this
center gathered information about businesses and
individuals and provided credit backgrounds.
• Credit village
To overcome the problem of non performance an IS was
established to facilitate accurate credit evaluation.
i) Credit ratings
ii) Credit Quality
iii) Incentive system
iv) Agricultural credit and philanthropic Finance
 YUNAN MODEL
• Rural Financial system
Loan Repayments from poor were invested in non profit
organizations to make more loans thus more income.
i. All to participate
ii. Financial leverage
iii. Promissory note to repay loans
iv. Analysis of each borrower
v. 90% of the requested amount
vi. Typical needs of farmers
 QUESTION NO: 02

How does social capital theory relate to the Yunan

model?

Reference:
http://www.investopedia.com/terms/s/socialcapital.asp#
ixzz3jHcK60UL
 SOCIAL CAPITAL THEORY
• An economic idea connecting individuals and
institutions to promote economic development
• Based on mutual trust and social networks that can
lead to valuable economic growth
• This model created a sense of self respect and
responsibility for loan repayments thus building
social character of individuals
• This is how the improvement in rural financial
system at Yunan County was established.
 QUESTION NO: 03

How does mechanism design theory relate to the

Yunan model?

Reference:
http://www.economist.com/node/9988840
 MECHANISM DESIGN THEORY

• Problem of asymmetric information solved

• This problem was solved by following three steps:

i. Gather information
ii. Develop credit information in inquiry system
iii. Share information
 QUESTION NO: 04

Are the Yunus model and the Yunan model the only
formulas for economic development?

Reference:
www.tutor2u.net/.../Lewis-model-of-structural-
economic-growth-and-development
 QUESTION NO: 05

How does the introduction of modern credit

information systems impact certain social
values surrounding personal privacy in
rural communities?
 QUESTION NO: 06

Will the Yunan model evolve into another

form in china? If so, what form?
 QUESTION NO: 07

To what degree should local government

involve itself in economic development at
the risk of over control that would defeat
individual initiatives?